Mallinckrodt (ticker: MNK) shares have dropped 99% in the past five years and the company’s market cap has shrunk from $15 billion to $200 million, as the Irish-domiciled, St. Louis-based outfit found its operations at the center of some of the pharmaceutical industry’s biggest controversies. Steep price hikes? Check. Questionable sales practices? Check. Opioids? Check.

While the pricing and marketing of Mallinckrodt’s lead product, Acthar Gel, brought the business its first unwelcome headlines, a crush of opioid lawsuits now threatens a balance sheet already leveraged with net debt that’s nearly five times Mallinckrodt’s annual cash flow. Current cash just about equals debt that comes due next year.

The company sells more than $3 billion a year worth of drugs, but it’s fair to say that its most urgent business is to get out from under a mountain of lawsuits. At last count, Mallinckrodt says it was aware of 2,153 opioid-related cases. The company says it can’t estimate its possible losses in these suits, but on Friday it agreed to settle two of them for $30 million. One other, over Acthar Gel sold to Medicaid programs, could cost it as much as $600 million, the drugmaker warns.

Last Week

A Post-Labor Day Rally

Global manufacturing contracted, while the Chinese yuan, the Argentine peso, and the Brexit-battered British pound fell, and on Tuesday the Dow industrials lost 285 points. Stocks then rallied on news of trade talks resuming, and were undeterred by a below-expectations jobs report. On the week, the Dow industrials rose 1.49% to 26,797.46; the S&P 500 gained 1.79% to 2978.74; and the Nasdaq Composite advanced 1.76% to 8103.07.

Dorian Moves Slowly On

A slow-moving Hurricane Dorian, which had been upgraded to Category 5, with wind speeds up to 185 miles per hour, killed at least 20 people in the Bahamas. The Abaco Islands and Grand Bahama were devastated when the storm stalled. Dorian then fell to Category 2 but grew larger, then lumbered toward the Florida coast, hammering the coastlines of Georgia and the Carolinas with wind, rain, and storm surge.

See You in October

The U.S. and China hiked tariffs on each other, deepening trade tensions and bolstering the belief that President Trump wants to decouple the two economic giants. Trump, in fact, warned China not to delay resuming negotiations because he’d double tariffs “when he won [reelection].” After a Thursday phone call between Chinese and American trade representatives, the two countries agreed to meet in October.

Chaos in Commons

Boris Johnson returned after the August recess to find he had lost his one-member majority—the defecting Tory walked across the floor while the PM was speaking—and over 20 members of his Conservative Party joined the opposition to vote to delay Brexit on Oct. 31. Johnson had suspended Parliament until mid-October, raising fears he would trigger a hard exit. The PM, in turn, threatened a snap election, and to ban defectors from running as Tories. The House blocked that attempt, and the thrust and parry continues.

Argentina in Crisis Again

Argentina imposed capital controls on businesses, after the peso lost a quarter of its value. Revoking capital controls had been a signature reform of President Mauricio Macri’s government when it came to power in 2015. Macri has also frozen gasoline and some food prices, with inflation hitting 55% and foreign currency reserves draining away. Peronist candidate Alberto Fernández is widely expected to defeat Macri in the runoff for the presidency in late October.

Freeing Freddie and Fannie

The Trump administration released a plan to privatize the two mortgage giants
Fannie Mae
and
Freddie Mac.
The two have been under government conservatorship since being bailed out during the financial crisis in 2008. Both parties had promised to abolish the pair, which back more than half of all U.S. mortgages.

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